Good day, and welcome to the Fathom Holdings Inc. second quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question from the queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Roger Pondel, Investor Relations for Fathom Holdings. Please go ahead. Thank you, Sarah, and welcome everyone to today's call. I'm Roger Pondel with PondelWilkinson, Fathom's investor relations firm. It is my pleasure today to introduce the company's founder and Chief Executive Officer, Josh Harley, and Fathom's President and Chief Financial Officer, Marco Fregenal. Before I turn the call over to Josh, I want to remind everyone that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the Risk Factors section of Fathom's latest Form 10-K, subsequent Form 10-Qs, and other company filings made with the SEC, copies of which are available on the SEC's website at www.sec.gov. As a result of those forward-looking statements, actual results could differ materially. Fathom undertakes no obligation to update any forward-looking statements after today's call, except as required by law. In addition, results discussed for the second quarter and for any portion of the 2022 third quarter are not necessarily indicative of results for the full third quarter or any other future period. Please also note that during this call, we will be discussing adjusted EBITDA, which is a non-GAAP financial measure as defined by SEC Regulation G. Important disclosures about this measure and a reconciliation of it to the most directly comparable GAAP measure is included in today's press release, which is now posted on Fathom's website. With that, it is my pleasure to turn the call over to Josh Harley. Josh? Thank you, Roger. Of course, thank you to everyone on today's call. Our entire team really appreciates your support. I want to start by thanking our agents and employees for their ongoing hard work, not just toward our vision, but also in helping us grow. I also want to say thank you to our Fathom family for their unwavering dedication to creating a culture built on service, and more specifically, serving and placing others first. Before turning the call over to Marco so he can review our financial results in detail, I'd like to touch on several subjects this afternoon. First, the key attributes of our model that are enabling growth in a changing climate. Second, our recent growth, some challenges we faced in the second quarter and are likely to face for the rest of the year. Third, present market conditions. Fourth, why we believe Fathom can actually benefit from the broader market headwinds over the long term. I'll also provide a quick update on our progress with integrating past acquisitions as well as any M&A activity. We've had the opportunity to speak with a lot of investors over the last few months who are new to Fathom and how we operate. It's really gratifying when an investor has that aha moment as they realize how different we are from other publicly traded real estate companies. While we acknowledge that Fathom is not immune to the challenges being felt around our industry, we continue to believe that we've built a better mousetrap. First, Fathom Realty is among the fastest-growing residential real estate brokerages in the United States. In fact, in just 12 years, we've grown to become the 10th-largest brokerage in the country out of over 86,000 brokerages and the 6th-largest independent brokerage. What's truly unique about our real estate brokerage is that we offer agents the opportunity to keep significantly more of their hard-earned commission dollars through a disruptive and differentiated flat-fee commission model. In fact, it's so differentiated that we're the only publicly traded real estate brokerage platform with this commission model. To address it in practical terms, the average agent who joins Fathom from a traditional model brokerage takes home around $12,000 more in commission annually. This makes us highly attractive to agents and allows us to enjoy agent retention rates approximately twice the national average. We don't just attract more agents, we keep them. The overall value we provide agents who join Fathom is unmatched by our peers. In addition, as we attract more agents to our low-cost commission model, our proprietary technology platform and wholly owned mortgage, title, and insurance businesses, should allow Fathom to generate significantly more revenue and profit per transaction over time. Further, we license our proprietary technology to outside agents and brokerages, the recurring revenue subscription offering, further increasing the long-term revenue potential for Fathom Holdings and the stickiness of our brand. When you combine our asset-light virtual model with the savings we generate long term from owning our own technology, you get an important key distinction for Fathom. We're able to charge our agents less than other brokerages while building a model to generate margins similar to our peers over time, even those who charge agents 7-10 times more than we do. As some of our earliest investors were quick to realize, it's not just that Fathom wins because of our unique commission model, but because of the walls that we've built around our business. We believe it would be extremely challenging, if not impossible, for most of our competitors to change to Fathom's model given their cost and franchise structures. In spite of softening market conditions for the second quarter year-over-year, revenue grew by 52.2%. Importantly, for the fifth quarter in a row, our real estate business was adjusted EBITDA profitable. Think about that. We charge a smaller fraction of what other brokerages charge their agents, and yet we believe that over the long term, we can achieve profitability far faster than they have. Even with today's economic uncertainty, we believe Fathom has a long runway ahead of us. In Q2, our agent count grew by 37.6%, which we believe is positive as we had tough comparison to last year's second quarter, during which we made a sizable brokerage acquisition. In addition, our transactions grew by over 31.5%, again, coming off of 74% growth in the previous Q2. Not only is our agent growth continuing to outpace most of our competitors, we're seeing increased interest from agents on a career site. Now we actively track unique visits and activity on the site, and we saw a 65% increase in page views in Q2 compared with the same quarter of 2021. In fact, page views jumped more than 14% just from May to June of this year. Agents are beginning to feel the proverbial squeeze, and we believe that our careers site traffic is a strong indicator of future growth. Now, as I stated earlier, adjusted EBITDA for our real estate business was positive this quarter. However, total adjusted EBITDA was negatively impacted primarily by our mortgage operation due to the unprecedented speed of interest rate hikes. Marco will speak in more detail about that in a few minutes. Our cost to acquire one agent during Q2 remained low at approximately $985, making our break even on each agent less than the $1,100 we earn on just their very first sale. I also wanna point out that the average lifetime value of an agent is currently over $21,000 on just the real estate side of the business. The ratio of that lifetime value to our cost of agent acquisition is more than 21x, and that does not take into account the revenue we're generating from mortgage, title, and our insurance companies. A few minutes ago, I referenced soft market conditions. I'll add a few thoughts to clarify what I meant. We're living through unprecedented times right now. Inflation is at a 40-year high, inventory is still in relatively short supply, and we've not seen interest rates rise this quickly in well over 50 years, which is concerning for potential buyers and hurting mortgage companies. These outside influences are having a negative impact on all real estate companies. As I said earlier, we're not immune to these market conditions. Moreover, none of us have an accurate crystal ball to distill what's to come. Although we are assuming that we will continue to see some pressure throughout the end of this year. While we believe these macroeconomic conditions were proving much more impactful on our competitors than it has been to us, we are mindful of the challenges that remain. Over time, we do believe that we can turn the otherwise adverse market conditions into a tailwind for us. Our conviction to this thesis has not changed. In fact, it's only strengthened. Due to these market conditions, our focus remains on reaching adjusted EBITDA profitability. I've asked our CFO to work with each of our business heads to reduce expenses by a total of $750,000 per quarter by Q1 of next year. We're determined to rightsize the company's expenses. The principal reason these kinds of market conditions could benefit Fathom is that we could see more agents joining our brokerage when those agents begin to see their income affected. In fact, July was our second-best recruiting month in Fathom's history, with a 35% increase compared to July of last year. This is especially noteworthy because generally, summer months are the busiest time of year for agents, so they're less prone to change brokerages. Now remember, there are only two ways for a real estate agent to net more income, increase their revenue by closing more sales, which is hard to do in a downturn, or decrease their expenses. We believe that we can help agents do both. For the majority of real estate agents, their largest expense is not their marketing. I wish it was. But in fact, it's the splits they pay their brokerage. With Fathom, an agent has access to all the technology, training, resources, and support they're used to getting at one of the legacy brands, yet saves an average of $12,000 or more per year in commission splits paid to the brokerage. In essence, an agent could close 20% fewer homes and still earn more income than they did the year before. We believe that this is a key reason why our agent count continues to rise and why so many brokerages are interested in joining the Fathom family. As you know, our mortgage, title, and insurance operations were all added through strategic acquisitions, and we're continuing to work diligently to integrate each business fully to ensure strong attach rates. While this process has been slower than we'd like due to our focus on achieving break even for the entire company, we are highly committed to getting there as soon as possible. To making sure the expenses throughout the company are in line with the current environment and our long-term goals. Since taking Fathom public, we've also made several strategic real estate brokerage acquisitions. We're receiving a fair number of inquiries on a regular basis from smaller brokerages who are interested in joining us. While we're eager to move forward on many of these opportunities, we remain very selective and thorough in our due diligence process prior to proceeding with any particular acquisition. We've been very careful to educate potential acquisition candidates and help them to reevaluate their expectations, as virtually all company valuations have decreased across the board. Although this has added some time to the acquisition process, we expect to continue evaluating and completing strategic acquisitions over the coming quarters. We believe valuations could become even more attractive if current macro headwinds persist or accelerate. I'm sorry, the prevailing wisdom is that real estate brokerages can't grow or gain market share right now due to some of the unprecedented macro changes we discussed. While Fathom is certainly not exempt from those challenges, our model and our execution continue to drive solid growth to date. Last but not least, I wanna acknowledge stock market volatility and its impact on Fathom's price per share. I know it's of little consolation to you that other publicly traded real estate brokerage platforms are also experiencing dramatic decreases in their public market valuations. Trust me, my family still owns around 38% of Fathom. I feel exactly what you feel. That said, I'm incredibly confident that we will deliver sustainable long-term value. In fact, I'm excited about Fathom's future. Thank you so much to all of you who share in that vision. With that, I'll turn the call over to Marco. Marco, it is all yours. Thank you, Josh. I'll start with a detailed review of our second quarter results. You will find our year-to-date results in today's press release. Second quarter revenues grew more than 52% year-over-year to $128.2 million, compared with $84.2 million for last year's second quarter. The increase resulted from growth in real estate transactions, higher average revenue per real estate transaction, and revenue contributions from our newly acquired businesses. GAAP net loss for the quarter was $5.6 million, or a loss of $0.35 per share, compared with a loss of $2.1 million or $0.15 per share for the 2021 second quarter. Our loss narrowed slightly in absolute terms from $6 million for the first quarter of this year and decreased more as a percentage of revenue given our top-line growth. Year-over-year change in GAAP net loss resulted principally from investments in future growth, operational and overhead costs related to acquired companies, increases in non-cash stock compensation, and non-cash amortization of acquired intangible assets. Our adjusted EBITDA loss, a non-GAAP measure, was $1.9 million versus an adjusted EBITDA loss of $2.3 million for the second quarter of 2021, and $2.1 million for the first quarter of 2022. While these results came in below the guidance we gave last quarter, profits in our core real estate business exceeds our estimates. Approximately 80% of our adjusted EBITDA miss was attributed to our mortgage business, which is not surprising given rise in interest rates in the current real estate market. I'll provide more color during my review of our business lines. In the 2022 second quarter, G&A was $2.4 million, or approximately 9.6% of total revenues, compared with $8.7 million, or approximately 10.4% of total revenues for the 2021 second quarter. On a sequential basis, G&A, as a percentage of total revenues, declined to about 12%. The increase in G&A dollars is primarily attributed to recently completed acquisitions and increases in non-cash stock compensation expense. Expenses related to marketing activities were $1.3 million for the current second quarter versus $378,000 for last year's second quarter. The change is mostly driven by an increase in marketing activities related to new market openings and recruiting expenses. Now I'll report our business units results. Our real estate division continues to perform very well. We grew our agent count by 38%, finishing the quarter with nearly 9,600 agents. As Josh mentioned earlier, agents can make more money with Fathom in a down market than they might make with a traditional brokerage firm, which we believe is why we are seeing a nice uptick in our recruiting. Additionally, we closed more than 13,200 real estate transactions for the quarter, a 32% increase from last year's second quarter. These results are gratifying considering the state of today's market. Adjusted EBITDA for real estate division was $1.8 million, making our fifth consecutive quarter of adjusted EBITDA profitability. One of the things we're most excited about is that our gross profit in the business grew by about $1.2 million from the first quarter of this year. About $820,000 or 70% of this increase in gross profit fell through the Adjusted EBITDA line, demonstrating the operational leverage we have created in our real estate business. Our mortgage business generated revenues of $2.6 million for the second quarter, down slightly from our 2022 first quarter results, which is not surprising given the reduction in mortgage originations across the country. The Adjusted EBITDA loss in the business was approximately $860,000, compared with $890,000 the first quarter of this year. As I mentioned earlier, our mortgage results for Q2 were the primary reason for our adjusted EBITDA miss, driven by market slowdown and interest rates that rose faster than at any other time in over 50 years. That said, we have a lot of faith in our mortgage business and believe we'll perform well over the long term. On a positive note, due to many of the enhancements we have been making to our mortgage business, we grew the business by 30% in July versus June of this year. Moving to our technology segment, second quarter 2022 revenues were $656,000, slightly higher than the $644,000 for the first quarter of 2022. Adjusted EBITDA loss in our technology segment, approximately $325,000 versus a loss of $400,000 for the 2022 first quarter. Our insurance and title business had combined revenues of approximately $2.8 million, about $300,000 more than the first quarter of this year. Adjusted EBITDA for the business is total $130,000, compared with $154,000 for the first quarter of 2022. Breaking down further, Verus Title generated adjusted EBITDA of $23,000 versus $54,000 for the prior sequential quarter, and adjusted EBITDA for Dagley Insurance was $107,000 versus $100,000 for the prior sequential quarter. We ended the quarter with a solid cash position of $19.5 billion, which gives us plenty of runway to execute our strategy. Now I'll spend some time on the attach rates. Given the difficulty market conditions for Q2, we chose not to roll out any new markets for Encompass Lending. We did, however, open Colorado as a new market for Verus Title. For Verus Title, we did not see a significant decrease in attach rate for Q2, but we did see a decrease in attach rate for Encompass in the second half of the second quarter. However, as I mentioned previously, we saw a 30% increase in closed transactions for Encompass in July, which was driven mostly from the relationship between Encompass and Fathom Realty. We believe that we can reach attach rates of 10% or better over the long term. Related to our share repurchase plan, year to date, as of June 30th, we purchased a total of just over 686,000 shares for about $6 million. Approximately $40 million remained under the plan at the end of the second quarter. I'll finish with our guidance for the quarter, for the third quarter of 2022, as well as updated guidance for the full year. This guidance does assume that the residential real estate market will continue to soften and the interest rates will remain at current levels or increase. The company believes that if market conditions improve, it may generate results that are better than currently anticipated. For the third quarter of 2022, Fathom expects total revenue in the range of $105 million-$110 million, and adjusted EBITDA in the range of a loss of $1.6 million to a loss of $1.5 million. For the full 2022 year, Fathom is now expecting revenue guidance in the range of $425 million-$435 million, and adjusted EBITDA is now expected to range from a loss of $6.8 million to a loss of $6.6 million. The company reiterated that it believes it can generate adjusted EBITDA exceeding $40 million per year at 100,000-110,000 annual transactions. While Fathom has not provided timeline for reaching this target, the company believes it can maintain transaction growth rates similar to those since the IPO. As a reminder, guidance is a forward-looking statement, which, as Roger noted at the start of this call, is subject to certain risks and uncertainties. Now before I hand the call back to Josh, I would like to add my thanks to the entire Fathom family. Even in this, an uncertain market, our team is working hard to generate transactions and provide the best possible service to our agents, home buyers and home sellers. Like most real estate cycles, this one will improve over time. With our unique business model and servant leadership, Fathom is poised to excel. Now I'll return the call back to Josh, so we can take your questions. Thank you, Marco. We believe Fathom has a clear, visible and long runway with solid growth prospects. No matter what the market holds, we believe our model is positioned to win over the long term. Thank you again for your trust in being part of our Fathom family. With that, operator, we are ready to open the call to questions. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch -tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Darren Aftahi with Roth Capital Partners. Please go ahead. Hey, guys. Thanks for taking my questions. First, maybe Marco, could you speak to kind of the cadence of file starts by month in the second quarter, and then how that kinda compares to, I guess, the month of July since that's all the data we probably have right now? Sure. Second quarter for us, we did not really see a significant decrease. Well, you know, let me just say it this way. Q2 had two sort of two quarters within one quarter. The first two months, April and May, performed relatively the same as previous years. June, or really even the last three weeks of June, was that we started seeing a reduction in file starts, which then continued into July. We did not really see a significant impact in the sort of file starts until, let's say, the last three weeks of June. What we're seeing right now is we were increasing our business relatively around 45%. What we see in terms of file starts right now is probably an increase of around 30%. We're seeing a decrease in file starts between that delta. One of the things that makes Fathom interesting compared to other companies is that because we continue to add agents, we're adding those agents, they're bringing in file starts. The best way I think to answer the question is that where we were running file starts growing around 45%, we're now increasing file starts at around 30%-35%. That's helpful. Thanks. Your comments about mortgage origination. I appreciate that with how interest rates kind of have moved, but are you seeing compression within the mortgage business itself on gross margin as well? Absolutely. There are three key factors in a mortgage company, typically. One is, you know, your margins, right? Second is, you know, fees that you charge. The third is if you hedge, and you can, some companies can make a little bit of money from hedging. What has happened is that because of the significant decrease in the sort of second half of June into July, volumes have decreased significantly. What happens is that the volume decreases, the company also has less revenue, but then affects margins, or some companies become much more competitive, and they're trying to gain any business at any price. Margins also compress. You see that's fairly typical. Whenever you see a significant change in the mortgage industry, for about, you know, 2, 3, 4 months, you're going to see compression of margins until the market stabilizes, and then those margins come back up again. Yes, we did see and continue to see some compression in margins for the mortgage. Yes. Got it. I think it's just last one for me, and then I'll pass it on. You talked about reducing expenses and the goal of $750 per quarter by Q1. I guess, what's kind of the low-hanging fruit? Given how quickly the market changed, you know, if you're sort of looking back Monday morning quarterback, was there some over-hiring in ancillary services that, you know, will be sort of the first thing to go? I'm just kind of curious where some of these cuts may come from and what's kind of the quickest path to getting there. Sure. It's a great question. Go ahead, Josh. Well, I was actually here at this intimate conference today and had a chance to speak to a lot of broker-owners. You know, they asked what we do moving forward. Like, how do we? What should we do as broker-owners moving forward in this market? One of the things I expected them, look, as a broker, you know, you should be looking for opportunities in this market to reduce expenses. Every business without fail, including Fathom. Like, we are incredibly frugal in our business, but even we have bloat somewhere. There's always some fat that can be cut somewhere. What we don't wanna do is do what some of these mortgage companies have done, other companies have this massive layoffs. I think it's not the right thing to do. It just shows poor hiring in the first place. That's not our intention. We're looking for other opportunities to, you know, to be more profitable through, you know, reducing unnecessary expenses. You know, we all have things that we like, so we wanna do a really good job. We're very thoughtful in how we do it. It's amazing if you really put the microscope to the business where you can find $10,000 here, $8,000 there, $500 there. We've gone to every single business head and said, "Hey, where can you find fat that doesn't need to be here? That's just, it's a nice to have, but not a need to have. It doesn't affect your ability to grow the business." Marco's done a good job of, you know, whipping the proverbial bullwhip to get them in shape, but they've all been very receptive. They've all been very positive to do their part to help us make this happen. I've been very proud of our groups. Go ahead, Marco. Darren, let me add the following. The best way to look at this, I think, is to say, look, if the company. We've been growing at 45% a year for many years. If now we're going to grow at 30% or 35%, it's just the ability to reduce the expenses to match the revenue growth. By doing that, it's part of it. Now, when you're running a growth business, you have to hire ahead of that growth, right? We're going to slow down some hiring just to make sure that our cost structure is aligned to our revenue growth curve. That's all. With that, we'll be able to say that it's not, it's a little different than some of the companies. The other thing is, if you look at some of the news and mortgage companies, we know mortgage is a very small component for our business, you know, and a lot of mortgage companies who are primarily mortgage companies are going through significant pain right now. For us, it's just adjusting, continue to get the attach rate. As I indicated, July was a very good month in a sense of the increase of the attach rate and increase in the revenue by 30%. We anticipate the revenue for ELG will continue to grow in August as well. I think it's just that this is maybe a 2-quarter adjustment that has to take place. In terms of reduction expense, it's really aligning the expense growth curve to the new revenue growth curve, at least for the next few quarters, until things get back to normal. Great. Thanks. Our next question comes from John Campbell with Stephens. Please go ahead. Hey, guys. Good afternoon. Hey, John. Hey, you know, after peeling back the onion here, I mean, it seems like everything is healthy outside of the mortgage business. The guidance, I mean, it does seem like you've got an expectation for pressure continuing there, at least on the EBITDA side. I totally get that. I'm a little perplexed by the revenue guidance. I'm thinking, you know, to get down to your second half revenue kind of frame. I think you've either gotta lose agents, which doesn't seem like that's the case. I mean, just given the commentary about such a strong July, or you might, I'm guessing, maybe you're assuming a pretty steep drop in transactions per agent and maybe price as well. Just as a starting point, maybe if you could walk through kind of those key factors for the annual revenue guidance. I wanna say one thing first, and Marco, like, you can take it. I actually had an opportunity of looking at every one of our competitors', you know, press releases and listening to every call I could listen to so far. The amount that, you know, that I've seen a lot of them decrease was significant. The amount that we decreased our revenue was very small, very nominal. It wasn't a big number, but we felt it was the right number. Marco, I'll let you kind of go into a little bit more detail about why we did that. Sure, sure. Yeah. We're certainly not anticipating higher turnover. Actually, our turnover continues to stay consistent to the past. As we indicated, John, we had the second best quarter, second best month in recruiting in July. Even as we add those agents, you know, those agents take time to, by the time they join, start doing transactions, right? Really our decrease in revenue, our adjustment to revenue guidance is really more related to some of the uncertainty in the market related to, as you know, the revenue per transaction is really related to prices of houses. We're beginning to see some significant changes in prices of houses in the West Coast, Idaho, parts of California. We just don't know how far that is going to, you know, how we're going to continue across the country. What we learned over time is that changes typically happen on the West Coast, and they sort of, you know, navigate through the rest of the country. There are cities on the West Coast where we're seeing a significant reduction. As you know, that's how revenue is calculated. It doesn't really change our gross profit per se, but, you know, we wanted to be conservative in our guidance because there's so much uncertainty in the market still. It's really more related to every average per transaction per se as opposed to number of transactions or as opposed to losing agents or all of that. That is one of the components that we just don't know how much that acceleration and reduction in price is going to take place. We wanted to be conservative in our estimates. Yeah. I think once you get to know us better, you'll realize that we try to be as conservative as possible. You know, everyone says that, but not everyone actually does it. We do try to be very conservative in our approach. The problem is, you know, we try to look at the crystal ball, but the more the government, the more the Fed try to quote-unquote help, the more murky that crystal ball becomes, and it becomes very difficult to start forecasting and really understanding what's gonna change. I wish that wasn't the case, but it is. It's the world we live in right now. We're doing the very best we can, but we wanna make sure that we're putting numbers out there that we feel good about, that no matter what happens, you know, we feel strong. Okay, that makes sense. Then I'm trying to get a little bit of a better grip on gross margin in the back half, and I know a lot of that's gonna be influenced about what you guys actually see from the top line and the mix and whatnot. I mean, I guess just conceptually, you know, if transaction volumes are, you know, gross commissions per agent drop as much as you guys maybe are expecting in the guidance, would you expect to see relief in gross margin, I guess, at least in the brokerage business? Well, I think, you know, because gross margin in a sense is a percentage, right? Because we charge a flat fee, so if revenues do decrease top line and our $500 stays $500, in a sense, our gross margin should increase, right? As a percentage, right? You know, we think that the worst case scenario, they'll stay the same, but actually they could increase, right? As, you know, if in fact this happens that the average revenue per transaction decreases, which may not, right? If it doesn't, then you know, our top line will be, you know, it will be higher than we're anticipating. I don't think our gross profit dollars per transaction are not going to change. In terms of percentage, it'll depend in terms of what the top line is, right? Because it's basically a percentage. That's kinda how we feel about that. I don't know if I answered your question, but. No, that's helpful. It would depend on the top, yeah. Yeah. Yeah. I think we all tend to focus on our side. Yeah. A little bit too much on the percent and not the dollar amount. But Yeah. Yeah. Last question from me. Just getting a better grip on the mortgage impact. You mentioned it is. Mm-hmm. You know, it certainly impacted the gross margin. Could you maybe shortcut that for us and just, I mean, what would have adjusted EBITDA and gross profit been this quarter had that not had the step back in the mortgage business? That's a great question. We anticipated that, for the mortgage business if we did not have what happened, especially in the second half of June, our adjusted EBITDA for mortgage would have probably been around $300,000 or $400,000 positive. That swing was about $1.3 million-$1.4 million. Okay. Very helpful. Thank you, guys. You can see that the majority of the miss was really related to mortgage. Our real estate business continues to do well. It is really most of the story on the miss. It was related to the mortgage business. Got it. Thank you, guys. Thank you. Thank you. Again, if you'd like to ask a question, please press star then one. Our next question comes from Tom White with D.A. Davidson. Please go ahead. Hey, Tom. Great. Hey, guys. How are you? Good afternoon. Two for me, if I could. Josh, you just mentioned crystal ball, so maybe I'll ask you to dust it off again. I'm curious to hear your thoughts about agent count and agent additions over the next few quarters. You know, sounds like July was great for you guys from a recruiting perspective. We heard from, you know, another brokerage last night. It sounds like they're seeing a kind of a pretty steep slowdown in agent adds. Just kinda curious. On one hand, it would seem like a platform like yours would, you know, arguably maybe accelerate agent attraction in a market like this. You know, just curious if you feel maybe incrementally confident that that could happen or, you know, are agents, I don't know, maybe susceptible to kinda sitting on their hands when, you know, when the market slows down for a little bit. Then I had a quick follow-up on expense. Sure. I think first of all, you raised a good point. I try to think about the last quarter, the year-over-year growth. We had, you know, about 38% growth for agent growth. If you think about if we removed that acquisition we made last year, this quarter we'd be pretty high. You know, so we've been averaging high 30s, you know, 40%, 30%, 38%, you know, for probably the last several years. When you remove acquisitions out of it. We feel really good that if you remove the acquisitions out of the last one, we'd still be maintaining, you know, pretty strong organic growth quarter-over-quarter, year-over-year for us. We feel really confident moving forward that that will continue. As I mentioned, when you think about, you know, all the leading indicators, when you look at the traffic to our website, when you look at brokerages reaching out to us thinking about joining our company, all of those numbers are increasing, and increasing more and more. I'm trying to come on this call and not be overly excited because, you know, there's good, there's positive, and there's also negatives. At the same time, I'm excited for the future because of all this that we're seeing coming in. There's an old saying, never let a disaster go to waste. I don't come across harsh, but there are some huge opportunities that can come out of this. We feel really good that, you know, one, just maintaining a really strong recruiting. We just added, I believe, 10 recruiters to the team. We're adding more recruiters to help get the word out, to help talk to more people. We are putting more out there in regards to feelers, talking to companies about possible walkovers and acquisitions. As I mentioned on a previous call, walkovers are nice because they're quick and easy. They can be done in a very, you know, 30, 60 days, whereas an acquisition might take, you know, 4-6 months, and so require a lot more legal and headaches. We can do some of these small acquisitions of 40, 50, 60 or 80 agents very quickly. You know, our focus has been. In fact, we actually put together a team that's dedicated to seeking out and talking to possible walkovers. We're doing a lot to not only grow organically just through agent referrals, through just the natural people reaching out to us as they hear about us in the market, but also being very proactive in reaching out to people and saying, "Hey, have you ever heard of Fathom? You know, have, you know, you wanna be part of something growing and bigger?" We've been very, very proactive, and so we feel good, you know, as we move forward and as more and more people feel that squeeze, that they'll seek it, you know, seek us out. The problem is we're still small. You know, even at almost 9,600 agents, there's over 1.6 million realtors out there. In the grand scheme of things, people have never heard of us. A big part of that is just making sure we can get out in front of them. One of the things we've found, and we track this religiously, it takes about 14 points of contact before someone actually pulls the trigger and joins Fathom. You know, making sure that we can get out in front of them, sometimes it takes 2 or 3 months, and sometimes 4 months, sometimes longer, because they've got transactions closing. One of the benefits, even though it is not great, but one of the benefits to fewer closings is that there become openings, windows of opportunity for agents to actually make a move. You know, last year when things were hectic and crazy, you know, they didn't have a window to make a move. They had closing after closing after closing after closing, and so they didn't really have a window for to make that transition. Now, suddenly they find themselves with two weeks or three weeks between a closing, which gives them the perfect opportunity to go ahead and make that move. There are pros and cons, obviously, to every single market, whether it's an upmarket or a down market. We wanna do the best we can to leverage, you know, a down market as best we can. I think we're doing that. Got it. Tom, let me just. That's. Tom, let me just add something. The best two recruiting months of the year is Q4 and Q1. I think that given the economic factors that are affecting every real estate agent, we certainly believe that Q4 and Q1 will be stellar months, stellar quarters for us to continue to increase recruiting. 'Cause that's, you know, in our history, we know that those are the two best quarters to recruit agents. Okay. Maybe just a quick follow-up. Any sense on the recruiting in July, you know, whether like agent kinda tenure or agent quality was comparable with, you know, kind of prior quarters, I guess? I'm just wondering, you know, if you guys might see a big influx of agents, you know, over the coming quarters, you know, guys who are sitting at other desks at other firms realize they're, you know, gonna have a really low production year and, you know, are looking to hang their license somewhere that, you know, will be a better value prop. I know that in the past you guys have, you know, you don't want just agents, you want quality agents. Just curious whether, you know, what July looked like maybe on that front. Yes. I'll add something. I'd love Marco to add some color as well. First, you're right. We don't want just any agent. We don't wanna be that brokerage, and there's a lot of them out there, that have 3,000, 4,000, 5,000 agents, which sounds like a great number, but their average agent closes one or two homes per year. It's not good because from a reputation standpoint, people start to think of that brokerage as a brokerage that doesn't know what they're doing. You know, a bunch of agents who are non-productive, that don't do enough transactions per year to really stay on top of market changes, contract changes, and so on. We want to avoid that, but at the same time, we're not full, right? An agent who closes three transactions is still profitable for us. You know, we just wanna take it with, you know, each agent one at a time. You know, if an agent closes 1 home a year, we probably won't take them. That's always been the way it is. 2, they've got to show us that they've got desire to grow their business. You know, 3, we'll probably take them, but try to coach them to get to 5, 6, 7, 8. You know, we really want our average transaction per agent to be in the high, you know, getting closer to 10 than being closer to 1 or 2, which some companies don't care about. That's part of it. But as we do bring in agents that are lower producing, you know, we wanna make a very strong focus on training them and helping them get their productivity up. If they just don't wanna grow, then we're gonna say no all day long. Just it's not worth their time, it's not worth our time. I've actually talked to a lot of broker owners while I was here, and a lot of them are telling me that most of their agents that they're losing are agents who are low producing. As we see a downturn in the number of transactions closed, we're seeing a lot of the agents who close zero homes or one home or two homes just say, "You know what? I'm out. I'm out of the business." A lot of the companies you're seeing an increase in their agent attrition is coming from these low producing and not producing. It's not that they're coming over to companies like ours have better value. They're just getting out of the business altogether. Because at the end of the day, 2 closings, whether you're making 100% commission or you're making, you know, 80% of the commission, it's still not enough to pay the bills. Tom, keep in mind that again, July, August are the highest months in the industry, right? Producing agents typically close most of their transactions with July, August, September. But to answer your question, July has been, you know, an average month in terms of it's similar numbers for us in terms of average per transaction and all of that. It hasn't changed. In fact, July, you know, typically July, August are not the best months for recruiting, even though we had our second-best month ever. Those higher producing agents are going to start changing in Q3, end of Q3 and Q4. That's when we're going to start seeing the higher producing agents make a change given that their business has decreased. For July, August and September, primarily we're going to see just a higher quantity of agents joining us, but they're going to be sort of the same agents that we've had in the past. The higher producing agents should come in Q4 as their business decrease, and then they are looking for a better, you know, compensation and commission. That's when we're going to start seeing those higher producing agents joining Fathom than we typically have. That's when that's going to happen, and that's what we anticipate. Great. Maybe I'll slip in one more if I can, and thanks for all the time. You made a comment that you know, attach rates for ancillaries were you know, maybe sort of lagging relative to your kinda long-term ambitions. It's due in part to you know, kinda the focus on getting to profitability. Just curious, you know, if profitability was kinda not an issue, like how and where would you be spending to improve attach rates? Is it just kinda like launching in more markets and getting these brands out there? Is there you know, kinda technology spend that you would deploy to improve attach rates? Just any color there. Thanks. Marco, I'll take the first part and you add some color, but you nailed it when you asked the question. When we go into a brand new market with mortgage or title, there's a sizable upfront cost to be able to bring people into that market. You hire a branch manager, hire loan officers, you know, all the people that are behind the scenes that make a mortgage work. There's that large cost. We've been a little bit slower to open new markets, which we indicated, you know, we haven't done as much of. That was part of it, right? The more markets we open up, the greater the attach rate overall becomes. In the markets we currently have, you know, there is some financial spend as well to get in front of agents, you know, giving a budget to some of the loan officers so they can go meet one-on-one for coffee, take people to lunch, build the relationships, because relationships are how mortgages are referred. These are all additional costs that, you know, we've been trying to be very thoughtful on. Marco, do you wanna add any more color to that? Yeah. I mean, there's an initial cost to open a new market. We, you know, given what happened in the second half or the second quarter, we did not open any new markets for mortgage. We focused on the current markets. As I mentioned earlier, Tom, July, we saw an increase of 30% in terms of revenue over June, and that increase primarily came from Fathom Agent. We definitely are seeing an increase in attach rate in July, and I think we'll continue to do that in August and September. That has been positive. You know, I think the best way to look at this is to look at this more as a delay of, you know, one quarter in terms of attach rate as we adjust our mortgage business. For title, we continue to see an increase, so I think we're, you know, we haven't seen an effect on that. But I think for mortgage, it's probably a one-quarter to two-quarter slowdown, but we quickly are picking up the attach rate as well. The mortgage team has done a really good job of dealing with this. Again, these are unprecedented times, and every mortgage company is going through a lot of challenges. Our mortgage team has worked really hard with our real estate agents in some specific markets. we feel confident over, you know, couple quarters, we'll get back to the normal attach rate, and we'll continue to deliver on that 10%, which is our long-term goal. Great. Thanks so much, guys. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Josh Harley for any closing remarks. Thank you, operator. Thanks, of course, to all of you joining our call today and for your continued support. We're extremely proud of all we've accomplished, and we'll continue to work diligently toward achieving our objective of adding greater value to our company for the benefit of all our stakeholders. With that, have a wonderful evening, and thank you again. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.